Ukraine GDP Plunges Most Since 2009 Amid War, Harvest Disruption

Wednesday, 30 Jul 2014 09:03 AM

 

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Ukraine’s economy shrank more than analysts predicted as rainy weather disrupted the growing season, compounding fallout from four months of bloody fighting in the country’s east.

Gross domestic product contracted 4.7 percent from a year earlier in the second quarter, the biggest decline since 2009, the state statistics committee said today on its website. The median estimate of six economists surveyed by Bloomberg was for a 3.1 percent drop. Seasonally adjusted GDP fell 2.3 percent from the first quarter.

The conflict against pro-Russian insurgents in Ukraine’s two easternmost regions is disrupting trade, weighing down an economy that’s contracted in seven of the past eight quarters. The second-most populous ex-Soviet republic has been further battered by a late start in crop farming that damaged agriculture that accounts for 9 percent of economic output, according to Dragon Capital.

“Higher frequency indicators have suggested a much sharper hit to economic activity from events in the Donbas over the past few months, and likely a larger hit to real GDP,” Tim Ash, an emerging-market economist at Standard Bank Plc in London, said by e-mail.

The hryvnia, the world’s second-worst performer this year against the dollar with a 32 percent plunge, depreciated 0.7 percent to 12.1959 as of 2:32 a.m. in Kiev.

Separatist Rebellion

The insurrection in the regions of Luhansk and Donetsk followed three months of deadly anti-government street protests and Russia’s annexation of Crimea in March. Hundreds of people have been killed as Ukrainian troops battled rebels since mid-April in the two regions near the Russian border.

Ukraine’s statistics office didn’t include Crimea in calculating second-quarter GDP following the Black Sea peninsula’s takeover by Russia, according to an official at the agency, who asked not to be identified, citing policy. The office adjusted last year’s statistical base accordingly and plans to do so in the future, the official said by phone today.

GDP will shrink 6.5 percent this year,the government and the International Monetary Fund predict. Output in crop farming shrank by more than 30 percent in June, according to the central bank.

“Farmers started harvesting later than in 2013,” Olena Bilan, chief economist at Dragon Capital in Kiev, said by phone. Wholesale trade declined “sharply” in the second quarter as instability spilled over from eastern Ukraine and affected companies, she said.

© Copyright 2014 Bloomberg News. All rights reserved.

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